Money laundered through British Columbia real estate contributed to prices surging 5% last year alone.
According to the much-anticipated report from the former B.C. deputy attorney general Maureen Maloney, $7.4 billion was laundered through the province in 2018, $5b of which went through the its real estate.
Attorney General David Eby called money laundering a “malignant cancer” and described it as a “national-level crisis.”
Extrapolating on the 5% price increase in 2018 mentioned in the government report, mortgage broker Robert Mogensen believes the number to be higher going back a few years when the run up on prices began.
“It’s that’s just in one year and you roll back the clock a year or two prior, one could conclude that it was even more influential in pricing,” said The Mortgage Advantage broker. “In 2018, that was the tail end of this ramp up in prices occurring, and things started to soften later in the year and through 2019. If you extrapolate the report’s findings, I’d say things were worse than that in 2016 and 2017.”
Additionally, Mogensen charges that Maloney would be naïve to believe that the impact on pricing is more pronounced in the single-family housing sector, as stated in the report.
“She says it’s more likely to affect single-family homes than condos in the Lower Mainland, and I say that is unbelievably naïve from the point of view that I, as a mortgage broker, and many realtors I’ve talked to over the last several years, have seen people line up at presale events and buy five or 10 condominiums, and at the time had zero intention to ever live in them,” he said. “Most of them were left empty because there was a lack of legislation requiring them to rent the units out.
“Now we have the [vacancy tax], but before that people were buying a dozen condos in one shot, and if that doesn’t’ look like money laundering, I don’t know what does. You have to be naïve to believe people were dumping money into the real estate market and leaving the homes empty simply to keep money in a safe haven. I don’t buy that.”
It is difficult to imagine that a slew of legislative measures won’t follow such a scathing report, and Mogensen reckons that might not be such a bad thing—as long as more taxes on residents aren’t introduced because they have been the biggest losers through this whole ordeal.
“The only way that things can be rectified is for the price correction to continue and prices to become more affordable for the average B.C. resident,” said Mogensen. “I don’t see any other way to rectify the situation. People only have so much income and that won’t change significantly enough over the long haul for the market to become affordable to them. The solution is to let the market fall.”